The observational equivalent of ordinal utility theory

2018 ◽  
pp. 193-214
Author(s):  
Ivan Moscati

Chapter 12 analyzes the third phase of the debate on expected utility theory, from the end of 1952 to 1955. The issues concerning the nature of utility measurement gained an autonomous status in this phase. Milton Friedman, Leonard J. Savage, Robert Strotz, Armen Alchian, and Daniel Ellsberg argued that measuring utility consists of assigning numbers to objects by following a definite set of operations. While the particular way of assigning utility numbers to objects is largely arbitrary and conventional, the assigned numbers should allow economists to predict individuals’ choice behavior. This is similar to the operational conception advanced by psychologist Stanley Smith Stevens and definitively liberates utility measurement from its remaining ties with units and ratios. The novel view of measurement quickly became standard among mainstream utility theorists, and its success helps explain the peaceful cohabitation of cardinal and ordinal utility within utility analysis that began in the mid-1950s.


1990 ◽  
Vol 6 (1) ◽  
pp. 139-146 ◽  
Author(s):  
John B. Davis

In a recent examination of the origins of ordinal utility theory in neoclassical economics, Robert D. Cooter and Peter Rappoport argue that the ordinalist revolution of the 1930s, after which most economists abandoned interpersonal utility comparisons as normative and unscientific, constituted neither unambiguous progress in economic science nor the abandonment of normative theorizing, as many economists and historians of economic thought have generally believed (Cooter and Rappoport, 1984). Rather, the widespread acceptance of ordinalism, with its focus on Pareto optimality, simply represented the emergence of a new neoclassical research agenda that, on the one hand, defined economics differently than had the material welfare theorists of the cardinal utility school and, on the other, adopted a positivist methodology in contrast to the less restrictive empiricism of the cardinalists.


1989 ◽  
Vol 21 (2) ◽  
pp. 351-365 ◽  
Author(s):  
J. High ◽  
H. Bloch

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